Blog Post

FAO Sees Food Prices Fall for Second Consecutive Month

The FAO Food Price Index for May was released yesterday and is down 2.5 points from April, and nearly 7 points from May 2013. This is the second decline in a row, following the ten-month high reached in March. The decline is driven mostly by lower dairy, cereals, and vegetable oils prices.

The Cereal Price Index fell 2.4 points in May, due in large part to declines in maize prices in response to favorable growing conditions and good supply prospects. Wheat prices were firm at the beginning of the month due to slow spring planting in the US and tensions in Ukraine, but the second half of the month saw wheat prices fall.

The Vegetable Oils Index declined 3.7 points. Soybean prices softened following a strong crushing season in South America and declining global import demand. Rapeseed and palm oil prices also fell due to a record EU harvest and rising output in Southeast Asia, respectively.

The Dairy Price Index saw the largest decline in May, at 12 points. This is the second significant monthly decline in dairy prices and can be attributed largely to improved production outlook and a readjustment of the market following limited export supplies seen over the past two years.

The Meat Price Index remained largely unchanged in May, while the Sugar Price Index saw a significant (9.3 point) increase.

The latest edition of the AMIS Market Monitor was also released yesterday. Improved crop prospects for major cereals led to lower prices in May, as did renewed confidence in shipments from the Black Sea region. Global cereal inventories are anticipated to continue to grow throughout the new season, and large supplies in exporting countries are expected to intensify competition.